Reference no: EM132560872
CASE STUDY
Amika Limited (Pty) is engaged in collecting, processing and distributing milk in Windhoek City. Most of the products of the company are such that these have to be distributed on daily basis. The company has a crew of distributors who approach the fixed customers, both bulk buyers and individuals. Mr. B. Jackson joined the company as an assistant accountant after graduating in Bachelor of Finance. The Finance manager was quite impressed by Mr.Jackson but initially could not offer him a better job than that of an assistant accountant. However, he promised to give him better opportunity whenever available. Mr.Jackson joined gladly.
The assistant accountants are employed on monthly salary basis. To ensure that the distributions of the company's products are maximized, the company has a provision of overtime pay. Normally, Assistant accounts work slowly in the beginning just to accumulate overtime pay. The pace becomes hectic towards the end of the day with some over time to meet the distributions schedule. There is no group leader but there are several old-timers who influence newcomers regarding the work rules. Mr.Jackson did not like this method of working but had to follow the group to be a good team mate. He gathered that over the years, the company had paid around sixty per cent overtime unnecessarily.
After a year, impressed by the work of Mr. Jackson and his overall suitability, the finance manager offered him the position of Accountant. The basis duty of accountant was to look after the Assistant accountants system and to develop new customers in a given area. Beside Mr. Jackson, there were four other Assistant accountants also. Mr.Jackson was sure of making distribution system effective as he was aware about the delaying tactics of the Assistant accountants. He was quite sure about cutting the overtime cost and impressing upon the manager about fixing the quota of work per day in two parts before lunch and after lunch. The Finance manager left convinced and introduced the system. However the efficiency dropped down considerably and no Assistant accountant was near the target.
The poor performance was blamed on:
- Poor Management Control System
- The production and distribution team
- Lack of seriousness in utilising appropriate costing methods
- Lack of Proper sales and distribution system
Required
Question 1: Write memo to Mr. Jackson discussing what you know about the ABC concepts relating to
1.1 cost objects
1.2 activity drivers,
1.3 activities,
1.4 resource drivers
1.5 resources.